Spending up before EOFY?

The June 30 end of financial year deadline looms large on small business calendars as a reminder to spend, spend, spend in the hope of claiming extra deductions.

However, there’s little sense in spending your surplus cash just for the sake of a tax deduction if it fails to bring in revenue or grow your business, and as a result leaves you in a bad cash flow position.

There are three steps to making your deductions more productive for your business now, and in the long-run.

Know the numbers

Limiting yourself to purchasing necessary equipment that will help you run more efficiently, expand your customer base or develop new offerings is money well spent towards generating new revenue.

The end of financial year, June 30 deadline looms large on small business calendars as a reminder to spend, spend, spend.

Understand government schemes

The Instant Asset Write-Off Scheme means you can instantly claim deductions for depreciating assets worth up to $20,000.

Use equipment finance to claim further tax deductions on interest payments while building equity in a business asset

This is particularly useful if you want to take advantage of the Instant Asset Write-Off Scheme but don’t have the cash to invest in small or large-scale equipment. Financing equipment and vehicles also helps maintain working capital in the business. So how could this work for you?

Using equipment finance to generate revenue and claim tax deductions

“The great thing about vehicle and equipment finance is that the equipment acts as security for the loan,” advises James Watson, director at LendingPro.

“This means you can borrow 100 per cent of the equipment value and maintain your working capital at the same time. This also makes applying easy and funding fast.

Being able to access the right equipment for your business, without being limited by how much spare cash you have, means you are able to unlock new opportunities and bring in more customers to create growth”.

Financing equipment also means you can take advantage of staged tax deductions. Not only can you utilise government schemes, but claim deductions on the interest payments you make on the loan too.

Mr Watson outlines another added bonus: “In addition to creating opportunities and taking advantage of tax deductions, any equipment you purchase is considered a business asset and can therefore help you gain funding in the future for further growth.”

To give you an idea of how you could make equipment finance work for you, let’s look at Scott’s business.

Scott’s bakery

Scott owns a bakery and is looking to upgrade his ovens. Instead of pulling cash from other areas of the business, or using his personal assets as security, he opts for an equipment loan where the new equipment acts as security.

With the assistance of the Instant Asset Write-Off Scheme, Scott is able to deduct depreciation and claim the interest payments over the life of the loan.

This way, Scott is able to take advantage of the Instant Asset Write-Off Scheme as the ovens are less than $20K and also claim the interest payments over the life of the loan. He is also able to serve customers faster and save on energy costs, allowing his business to generate more revenue and continue to grow.

There are many uses for equipment loans including:

Vehicles and fleets

Factory or commercial machinery

Specialist equipment, including the medical and hospital sectors

Equipment and tools for trades

Construction and mining equipment

General office equipment including computers, printers and phones

Technology, including servers, laser cutters and 3D printers

Hospitality equipment such as appliances and kitchen tools

Retail tools such as point-of-sale equipment and CCTV cameras

Where to go

Getting fast, simple equipment finance is easy when you use LendingPro. The team of experienced finance brokers will walk you through the application process, simply visit lendingpro.com.au or call 1300 998 555 to chat with a loans advisor.

The information in this article is of a generalised nature, it is important that you obtain individual tax advice for your own small business.